GBP/USD: Oversold conditions remain. A potential bottom remains elusive; Senate proposes stopgap solution

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<li>UK Mortgage approvals expected to continue to drop</li>
<li>No major revisions expected with Q2 GDP report</li>
<li>BOE overnight index swaps price in a peak rate of 5.369% at the Feb 1st meeting</li>
<li>US Government Shutdown risk remains as Senate negotiators propose stopgap solution</li>
</ul>
<p>The British pound looks like it is heading for a further breakdown as dollar strength appears to be resuming.  Technical traders trying to find a bottom are getting frustrated as oversold conditions deepen and on doubts that a DeMark Buy countdown might yield a meaningful rebound.  The bearish trend has steadily broken below several key technical levels and weekly support from 1.2114 seems to be the next target.</p>
<p><a href="https://www.marketpulse.com/wp-content/uploads/2023/09/GBPUSD_2023-09-26_17-09-59.png"><img loading="lazy" class="alignnone size-large wp-image-807773" src="https://www.marketpulse.com/wp-content/uploads/2023/09/GBPUSD_2023-09-26_17-09-59-1024×545.png" alt="" width="700" height="373" srcset="https://www.marketpulse.com/wp-content/uploads/2023/09/GBPUSD_2023-09-26_17-09-59-1024×545.png 1024w, https://www.marketpulse.com/wp-content/uploads/2023/09/GBPUSD_2023-09-26_17-09-59-300×160.png 300w, https://www.marketpulse.com/wp-content/uploads/2023/09/GBPUSD_2023-09-26_17-09-59-768×408.png 768w, https://www.marketpulse.com/wp-content/uploads/2023/09/GBPUSD_2023-09-26_17-09-59-1536×817.png 1536w, https://www.marketpulse.com/wp-content/uploads/2023/09/GBPUSD_2023-09-26_17-09-59.png 1634w" sizes="(max-width: 700px) 100vw, 700px" /></a></p>
<p>The recent surge with the dollar was also supported by safe-haven flows from rising American government shutdown fears, so a potential stopgap solution could allow for the dollar rally to pause.  After the NY close a tentative proposal between Senate Republicans and Democrats would keep agencies functioning through mid-November. The potential solution fund federal agencies at current levels for another 45 days, with little support given towards Ukraine or disaster relief.  It isn&#8217;t clear if they have enough votes to avert an October 1st showdown, but momentum is growing for a band-aid solution.</p>
<p>If risk aversion remains the dominant theme of the week, it will be hard for the British pound to find key support.  Unless Treasury yields tumble and disinflation signs grow, short-term dollar strength seems likely.</p>